2. Topics
1. How money is created, how its dynamics influences the
economy; economic cycles; Minsky moment
2. Finance, Financialization, different types of investment
instruments, security and scams
3. Approaches to investing: Buffett, Soros, Kyosaki
4. Technical analysis
5. Stock-Flow consistent modelling for corporate finance
planning
6. Macro and how it affects the markets (using examples)
7. Current trends in crypto; forms of exposition to it
8. Means of payments and liquidity (using examples)
10. Little bit of history
Born 1929 in Omaha, Nebraska, 10 months after
the markets collapsed to a family of a broker and
later Republican congressman.
Studied at Columbia under Benjamin Graham.
Warren Buffett
11. Thorough analysis of securities
Know everything you can about the stock:
Expected profits and interest/divident payments
Material assets and they relationship to the share‘s
price.
Warren Buffett
12. „You buy a company,
not a piece of paper.“
Benjamin Graham
13. Opposing Chicago school of thought
Share prices reflect all available information.
No one can beat the market without luck or
insider info → index investment.
15. Beating the indexes
80% active traders underperform the benchmark.
Cummulative returns of people around Graham and Buffett
were 7-72 times better than the indexes.
Warren Buffett
17. Little bit of history
Buffet remembered all 10,000 pages of Moody‘s almanach.
He knew financial reports of almost all traded companies.
He read Carnegie‘s How to Win Friends & Influence People.
Warren Buffett
18. Cash is king
Buffet bough shares of an unknown bus company in Massachussetts.
Cash reserves were 60 USD per share.
Share price was 30-35 USD.
The management wanted to increase the value by dissolving the cash into buying
their own share‘s back (privatization).
Buffet contacted the big share holders directly.
Warren Buffett
19. Running his own fund
Buffett became independent from Graham in mid 1950‘.
He had 175,000 USD of his own money.
He rented the rest from Friends&Family.
That is very risky and you need to be confident.
Warren Buffett
20. BLP Fund settings
No management fee.
50% from success above 4% performance fee.
Butteff covers 25% of all losses.
Minimum info about the strategy and portfolio.
Warren Buffett
23. Berkshire Hathaway
A textile factory in New England.
Stable, boring company with low price to asset ratio.
Buffett bought it in 1965, 9 years after he returned to Omaha
and started his Friends&Family fund.
His AUM was already 50 million then. 112.5 billion now.
Warren Buffett
24. Dissolution of Buffett Partnership Ltd.
1983, the BPL‘s investors knew what companies they owned
for the 1st time.
Buffett offered them to cash out or keep the shares.
He wanted them to cash out, yet he honestly informed them that
he intents to buy more shares.
Warren Buffett
25. SEC investigation
Buffett and his colleague Munger overpaid 50% in an acquisition. They pleaded not guilty.
„When a cop drives 500 miles to you, you will get a fine.“
They agreed to clarify the complex web of their holding companies.
„I didn‘t do anything but I promise I will never do it again.“
They paid the fine, however, in 14 days, Buffett was appointed to a special comittee under
SEC SEC basically confirmed they were innocent.
→
Warren Buffett
26. „Wealth is created only by
building companies which
assumes long-term
responsibility.“
27. Mergers, not hostile takeovers
„We don‘t do hostile takeovers. If you are interested in a
merger, call me.“
Endangered companies seeked Buffet‘s help.
He won a reputation for providing „gentleman protection“.
Warren Buffett
28. Examples
1989, Buffett blocked the raiders on Gillette and U.S. Air
Gillette was very profitable.
The airlines were a disaster. Lucky sale in 1998.
„The worst business is the one that grows quickly, needs a lot of capital
and makes little or no profit.“
Warren Buffett
36. Little bit of history
George Soros
Born 1930 in a rather poor family in Budapest
to a swindler father Tivadar who managed to
survive the Nazi occupation.
37. Little bit of history
George Soros
Moved to London at the age of 17.
Made friends with Karl Popper: Falsification
1953 working as a trainee at a broker firm
specializing in arbitrage.
38. Trading at two markets
Buy low, sell high
Arbitrage helps
equilibriate both markets
39. Little bit of history
George Soros
Started Double Eagle hedge fund in 1969.
Very few limitations and restrictions.
Practical broker experience persuated Soros that the
default state of a market is disequilibrium!
40. „I respect the herd. Not
because it is right but
because it is like an
ocean.“
42. Shorting means
George Soros
You speculate the price will go down.
You borrow the asset when their price is 100.
You sell it right away.
You rebuy and return it when the price is 80.
→ 20 (minus the interest) is your profit
44. Understanding bubbles
George Soros
Markets are not rational machines.
People‘s behaviour is reflexive.
It results from unpredictable interactions without
any regularities such as in physics.
45. Understanding bubbles
George Soros
Creditors misinterpret the creditworthiness of their debtors and the future
price of assets such as houses.
As they provide more loans, the price indead inflates.
That reinforces their original conviction (self-fulfilling prophecy) and attracts
more creditors.
Until they‘re proven wrong. Minsky moment
46. Soros‘s
investment
diary
Investment always based on
a theory of the market‘s
dynamics.
No theory = No investment
Paradigma (bubbles,
reflexivity…) stays, theory
changes with positions.
Theory is often wrong.
George Soros
50. Little bit of history
George Soros
1990, the UK entered the European ERM.
Members had to keep the ER within ±2.25% of the
original. Practically to keep up with the Deutsche
Mark.
51. Little bit of history
George Soros
Germany reunited. West Germany wanted to boost the economy of DDR.
Polititians feared raising taxes they borrowed the money.
→
To avoid inflation, they sterilized the new money by increasing the interest rates.
Higher interest rates currency tends to appreciate.
→
Other member countries had to follow and increase as well.
52. Little bit of history
George Soros
Raising interest rate = contractionary policy
By Summer 1992, shorting European currencies was a bet
that governments won‘t be able to hold high unemployment.
Italy surrendered first and devalued its Exchange rate.
53. Little bit of history
George Soros
John Major, prime minister of the UK declared he will hold.
September 16, 1992, Black Wednesday, the UK raised the interest rate to
12% and declared it will go to 15%.
The country was in recession and people started selling Sterling anyway,
globally. Pound devalued by 10% immediately.
The UK suspended its membership in ERM.
55. Among the best investors ever
80% active traders underperform the benchmark.
Soros‘s Quantum fund made 31% on average
between 1969 and 2000.
10,000 USD 43,000,000 USD in 30 years
→
George Soros
60. Little bit of history
Robert Kyosaki
Born 1947 in Hawaii to an academic family.
Famous educator but controversial.
Class action suit against him in 2010.
His companies went bankrupt few times.
61. Main ideas
Robert Kyosaki
Financial independence can be achieved through
passive income.
Wealth cannot be achieved by from going to
school and obtaining a traditional job.
62. Assets vs Liabilities
Robert Kyosaki
Assets put money in your pocket:
rental properties, stocks…
Liabilities take money out of your pocket
personal residence, cars…
63. Cash Flow
Robert Kyosaki
CF is more important than capital gains.
Steady stream of passive income from assets like
real estate and investments is more reliable
than hoping for capital appreciation.
64. Cash Flow
Robert Kyosaki
Cash flow management is crucial.
Always pay yourself first.
Postpone paying invoices and taxes.
Try not to pay taxes at all.
#3:I am not a biographer of either of these gentlemen, neither am I an expert on their strategies.
The meaning of this lecture is not to provide an exhausting story of their lives.
The meaning of this lecture is to illustrate various investment strategies to help you get inspiration for building your own strategy.
#14:Buffet once said in reaction to Chicago school:
Alright, we suppose that individuals cannot beat the market.
Imagine 225 millions of Americans attend a competition in flipping a coin. The results are random.
After 10 flips, we will have some 220 thousand Americans left. Each of them will be winning 10k USD. And all will boast about their phenomenal skills.
After 20 flips, only 215 attendees will remain. Each of them will be winning over a million USD. They would probably start writing books about Becoming a Millionaire.
Boring professors of economics might argue that orangutans could do the same. And they would be right.
But what if you found that 40 of these orangutans came from a zoo in Omaha? You should ask the zoo keeper what they feed them.
The cummulative
#15:In conclusion:
Soros does not believe in market equilibrium, he looks for deviations.
He can bear loss. He ignores his ego and opinions of other people.
He is a master of attacking the weak spot and pulling the trigger.
His positions are based on intuition, not analysis.
He developed and improved the hedge fund model.
#16:He had an almost photographic memory, he remembered a tremendeous quantity of financial data – textbooks, Moody‘s reports, financial reports of companies etc.
His fascination with numbers was bordering autism.
#19:Imagine the hell you would get in your marriage if you lost your father-in-law‘s lifetime savings.
#20:Buffett Partnership Limited.
Buffett gave zero information about the bought companies. He was scared investors would call him if the prices went down.
#21:Graham‘s quote: „Be afraid when the others are greedy, be greedy when the others are scared.“
Buying when there‘s blood in the streets. Buying distressed companies with a discount, repairing their management and make them prosperous.
#22:One of the major companies in Buffetts portfolio was American Express. Payment cards and travel checks. The market was crashing and investors expected it to fail.
Buffet called a broker in NY, Harry Brandt, who was his friend. He asked Brandt to visit shopping malls and places where they accepted checks.
Brand gave him a report: „ Rich customers use checks and cards naturally. No one is afraid American Express is in dire straights, probably they don‘t even know it.“
František Kudrna and Facebook.
#23:The industry was dying. Buffett could not save it. Still his holding adopted its name.
The first billion is most difficult.
#24:If they cashed out, Buffett recommended to the investors to invest in indexed funds or good bonds.
#25:If they cashed out, Buffett recommended to the investors to invest in indexed funds or good bonds.
#26:Buffett always focused on few companies only and devoted his full attention to them.
#28:In 1998, there was a short sentiment of optimism in airline industry. In the next 10 years after the sale, the company went bankrupt. Twice.
#33:Soros has an almost mythical power to imagine all the money flows in the World.
#35:Buying something wishing to sell it to a greater fool in future.
Joke with the candles with no wicks.
Investing in bubbles is like unprotected sex. It is fun but you need to know when to pull it out.
#40:Even the most stupid idea can justify an investment in case it sticks in the mind of the market.
#41:Soros longed them and knew when to flip to shorting.
#43:„Bubbles are like trees. It takes time before they develop in the full, beautiful shapes. Yet in a forest, a single tree seldom grows to its natural shape because it is surrounded by other trees.“
#44:In the calm times, it appears there are statistical regularities.
Those fall apart once a tention appears.
#46:Soros‘s diary is very pessimistic, filled with self-criticism, emphasizing failures and investment errors.
Summing up the numbers though, we see that he was making huge profits!
#47:In 1980‘, the markets were crashing. Soros shorted the first round of the downfall but couple of months later, an even deeper fall cought him off guard.
He lost hundreds of millions within days.
#53:Soros created a short preasure by selling all his Pounds to Mark. Also, he borrowed 10 Billion USD to short Sterling.
Quantum fund exchanged Marks back to cheaper Pounds and repaid the loan.
The profit was 1 Billion.
#54:If it didn‘t work, the Pound might have hold its Exchange rate but not appreciate much.
Soros‘s involvement was no known at first. The course of action was inevitable, Soros merely accelerated it.
#55:In conclusion:
Soros does not believe in market equilibrium, he looks for deviations.
He can bear loss. He ignores his ego and opinions of other people.
He is a master of attacking the weak spot and pulling the trigger.
His positions are based on intuition, not analysis.
He developed and improved the hedge fund model.
#56:Soros is a predator and he usually criticises regulations.
However, he considers some derivatives, namely CDS, toxic securities.
What is meant to be an insurance, is actually a financial weapon of mass destruction. Creditors can bet on the default of their own debtor which creates moral hazzard.
The size of the CDS market reached 30 Billion USD in 2022 (the highest since 2009).
#59:The book is written in a very simply style so that literally every one could understand it. It often repeats the basic ideas.
#60:Suid by the Canadian people who attended his seminars. Investments in trailers and trailer parks, which were being propagated as "successful" by seminar teachers, were found to actually be barren pieces of land that no one was using.
4 times bankrupt I believe. Last time it was 2024
#61:He emphasizes financial education is needed, not general education or degrees.
His real dad who was a teacher had an above-average salary, yet he was always short of money.
His rich dad (dad of his friend) tought him how to become an enterpreneur and how to earn passive income.
#63:His game discorages from starting your own business. It advices to buy stock at a discount instead.
#64:His game discorages from starting your own business. It advices to buy stock at a discount instead.
#65:Supported Trump in 2016 election and wrote 2 books with him.
The loopholes in the tax regulations are meaningful.
The government nudges business people to allocate their investment where it believes it is needed.
If people like Trump pay close to no taxes, it means that they help the society.
Enterpreneurs know better than government how to build successful projects.
#66:Kyosaki advices to borrow other peoples money (use a mortgage) to buy undervalued assets, typically real estate property.
He even says you should find the next buyer and SELL the asset before you even buy it. Then there is no risk and you only cash out the difference.
He speaks about „good debt“ when you use it to buy assets.
#67:Leverage is risky though. Kyosaki teaches risk management despite being repeatedly bankrupt.
#68:Kyosaki is a proponent of Gold and Bitcoin. He calls it good money.
#70:There was even an ETF Inverse Cramer until January 2024
